Economic news

Dollar scales fresh peaks as Fed cut bets recede

2024.02.04 21:04



By Rae Wee

SINGAPORE (Reuters) – The greenback rose to an eight-week excessive in opposition to its main friends on Monday as merchants clawed again bets for aggressive price cuts by the Federal Reserve this 12 months in view of a still-resilient U.S. economic system.

The yen as properly as the Australian and New Zealand {dollars} in the meantime tumbled to two-month lows, whereas the euro equally bottomed at a greater than one-month trough of $1.07675 in opposition to a stronger dollar.

The peaked at 104.18, its highest since December.

The Fed repricing has come on the again of Friday’s blockbuster U.S. jobs report that far exceeded market expectations, reinforcing Chair Jerome Powell’s assertion on the conclusion of the central financial institution’s coverage assembly final week {that a} March price cut was unlikely.

“A one-two punch from Jay Powell’s FOMC presser and a very strong nonfarm payrolls report have essentially closed the door on a March rate cut,” mentioned Chris Weston, head of analysis at Pepperstone.

Traders are pricing in only a 20% likelihood that the Fed might start easing charges in March, as in comparison with an almost 50% likelihood per week in the past, in response to the CME FedWatch software. The odds for a cut in May have additionally lengthened.

In an interview with the CBS information present “60 Minutes” that aired Sunday evening, Powell mentioned the Fed will be “prudent” in deciding when to cut its benchmark rate of interest, with a robust economic system permitting central bankers time to construct confidence inflation will proceed to gradual.

Fed funds futures now present roughly 137 foundation factors price of easing priced in for the Fed this 12 months, down from 150 bps on the finish of final 12 months.

The Japanese yen was final 0.15% decrease at 148.58 per greenback, having hit a trough of 148.82 earlier within the session.

The slid 0.33% to $0.6490, whereas the misplaced 0.25% to final commerce at $0.6050.

Sterling bottomed at $1.2600, its lowest since Jan. 17.

“The dollar is likely to hold on to its recent gains,” mentioned Carol Kong, a foreign money strategist at Commonwealth Bank of Australia (OTC:) (CBA).

Treasury yields additionally jumped on expectations of higher-for-longer U.S. charges, with the two-year yield, which generally displays near-term rate of interest expectations, final up almost seven bps at 4.4386%.

The benchmark 10-year yield rose 5 bps to 4.0829%.

Elsewhere, China’s securities regulator vowed to forestall irregular market fluctuation, after Chinese shares plunged to five-year lows, however introduced no particular measures. [.SS]

That did little to assist the yuan, with the final marginally decrease at 7.2182 per greenback, pressured by a stronger dollar.

It had fallen to a greater than two-week low of seven.2225 per greenback earlier within the session.

“I doubt (the news) will materially support (the yuan) in the near term, unless we get more concrete details,” mentioned CBA’s Kong.

“So far we’ve just seen speculation and some media reports talking about further support for the equity market or the property market. But we haven’t really seen a lot of details on those easing measures from the Chinese government.

“So I feel markets are nonetheless fairly uncertain about whether or not or not these reviews will materialise.”

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